Ikea Contract a Huge Step for Thai Exporter

S.P.S. Group, a major local furniture exporter, is targeting 5 billion baht worth of exports in three years after being named a major supplier to Ikea, the popular Swedish do-it-yourself furniture chain.

The company targets 20% export growth to 2 billion baht this year. However, it has secured a six-year, 18-billion-baht contract with Ikea that will result in much greater growth.

To ensure production capacity meets the heightened demand, S.P.S. recently built a new one-billion-baht factory to supply high-growth Asian markets such as China and India, as well as established European markets such as Germany, France and the UK.

S.P.S., established in 1966 as an original-equipment manufacturer of home and office furniture, later expanded into visual entertainment products such as TV stands, supplying Japanese companies such as Hitachi and Sony.

Kerati Sermpraphasilp, the chief executive of S.P.S. Intertech Co, said 60% of group production will be supplied to Ikea.
S.P.S. has supplied Ikea in limited quantities since 1991.

Mr Kerati said the Swedish company was embarking on an aggressive five-year regional expansion to 20 branches from six now.

Six new branches will open in Japan for a total of 10, while others are planned for Singapore, Malaysia and South Korea along with the first Thai location in early November this year.
The present high price of rubber is not an obstacle to the Thai furniture industry, as the country has sufficient yields for the industry despite planters’ delays in cutting their trees, said Mr Kerati.

“It’s a typical industry cycle. The price will return to normal,” he said, adding that between 300,000 and 350,000 rubber tree plantings a year are sufficient to meet local furniture industry needs.

Mr Kerati, who is also a vice-president of the Thai Furniture Industries Association (TFA), urged the new government to address processing problems in the rubber industry.

The EU is expected to issue a ban on furniture and other products using rubber wood from conserved forests, which could cause Thailand to lose export share in this market.
Only 20% of rubber in Thailand is planted on land with full legal title such as Nor Sor 3 Kor, while the vast majority is grown on land with lower-grade titles including conservation areas, said Mr Kerati.

The government must amend the law to legalise deeds for rubber-growing areas and promote greater transparency in rubber planting, said Mr Kerati.

He said the TFA raised the issue with the Joint Public-Private Consultative Committee in February and would do so again under the new government.

S.P.S. Group comprises three companies – S.P.S. Cooperate Ltd, a maker of panel furniture; S.P.S. Inter System Co, a designer of visual entertainment products; and S.P.S. Intertech, incorporating new technology in the design and manufacture of TV stands.

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